Mintz on carbon taxes

Jack Mintz, who is apparently one of Canada’s leading economists, came out in support of a carbon tax today. Specifically, he suggested that federal taxes on gasoline be expanded to include the taxation of other carbon-generating fuels. This sort of upstream tax on fuels can complement a cap-and-trade regulatory scheme for large emitters by covering sectors of the economy too small to be efficiently addressed through the latter approach. Mintz does not have a reputation as a green champion, making his endorsement all the more suggestive of a general trend towards accepting carbon taxes as one good approach for addressing the massive problem of climate change.

Whereas the carbon tax recently created in British Columbia begins with prices of $10 a tonne, eventually rising to $30, Mintz proposes a federal tax of about $42 a tonne. One of the major issues raised concerns inter-provincial transfers from high emission provinces like Alberta and Ontario to lower emitting provinces like Quebec. That being said, there are many ways in which carbon taxes can be designed. They can be set up so as to not increase the overall tax burden, on account of taxes being reduced elsewhere. They can also be designed so that revenues collected in one province must also be recycled or invested there.

With luck, people will start to realize the opportunities inherent in replacing conventional taxes with carbon taxes. Doing so will offer a strong financial incentive to invest in greater efficiency, cleaner fuels, and more sustainable practices generally.

JUDY MADDREN (NEWSCASTER): Canadians will be introduced today to a national carbon tax. It’s just a proposal, but its promoter is one of Canada’s leading economists. Jack Mintz is the former head of the C.D. Howe Institute and he is now with the University of Calgary. Mintz and another economist are calling on Ottawa to broaden the federal tax that now applies only to gasoline. As Margo Kelly reports, the idea is to tax other carbon-producing fuels as well.

MARGO KELLY (REPORTER): Economist Jack Mintz says the idea of re-jigging the federal fuel tax into a broad-based environmental tax is an idea that popped up ten years ago. That’s when Paul Martin asked him to chair a committee on business taxation. The idea went nowhere, but Mintz believes that now the timing is right.

JACK MINTZ (ECONOMIST): Quite a significant part of the business community now, as well as the oil patch in Alberta, prefer having some sort of carbon tax over cap-and-trade systems.
MARGO KELLY (REPORTER): The federal government makes just over five billion dollars on gas taxes every year. If that tax is applied to heating fuels, such as oil, coal and natural gas, billions more could be generated. That would encourage business to reduce carbon emissions and their costs, and the government would refund any extra revenue through personal and corporate tax cuts. While B.C.’s carbon tax starts at ten dollars a tonne and will rise to 30, Mintz’s proposal comes in at 42 dollars a tonne, equivalent to the federal tax now charged on gasoline. Mintz says he isn’t wedded to that number. The trick, he says, will be trying to combine a national tax with some provincial plans to avoid a hodgepodge of policies and the possibility of double taxation. Another trick will be convincing the Harper government to take such a bold move. Margo Kelly, CBC News, Toronto.

Going all the way to carbon taxes could be regressive – lots of the poor emit lots of CO2. Making driving more expensive, especially, will hurt a lot of working families long before it changes the structure of our cities.

I am not sure about the relationship between wealth and emissions within Canada, though it seems a safe bet that richer people do emit more overall.

Broad carbon taxes will raise gas prices, but such price increases are necessary and inevitable. Arguably, it is better for them to occur now (and in a way where the revenues accrue to our government) than in the future, when the extra revenues from higher gas prices are likely to accrue to the governments of major oil exporting countries.

Also, a carbon tax is neither equitable nor effective enough in isolation. Other policies are also necessary. We should be building fewer roads and more dedicated bus lanes and transit corridors. We should be requiring all new cars to get more than 40mpg as of next year, with higher targets not far off. We should be financing capital investments to reduce carbon emissions.

Finally, if it does transpire that carbon taxes are strongly regressive, we can always balance that by making the income tax system more strongly progressive.

Yeah, I’d like to see some hard numbers on the alleged “regressiveness” of a carbon tax. During the battle over the recently defeated NYC congestion charge, there was the persistent claim that it would hurt “working-class families”. The numbers though, show that the working class and the poor take the subway to Manhattan, while it’s the upper class that drives. While I’m sure there are some poor rural areas in Canada that would be adversely affected by a carbon tax, I’m afraid I feel pretty calous towards them: if their lifestyle is unsustainable, it’s not ethical for them to continue it unchanged nor for us to subsidize it. I’m all for helping with transition costs and all that, but the only way to trigger said transition in the first place is to put a price on carbon.